Week InReview
Friday | Jul 19, 2019
Tweets of the week.
Jennifer Ablan is Reuters editor-in-charge of US investments
in case you missed it...
This again
The perennial problem that is the US debt limit is oozing its way back onto the agenda. Treasury Secretary Steven Mnuchin said that under one of the Treasury Department’s scenarios, the country will be at risk of defaulting on payment obligations in  early September. With Congress due to start its recess on July 26 and not return until mid-September, there is some pressure to  agree to a way forward in the coming weeks. Mnuchin was in Paris for a meeting of G7 finance chiefs where the French are busy pushing for agreement  on a digital tax on tech giant profits. 

Yield-starved investors are gobbling up CLOs in this small but fast-growing corner of the market, even as the underlying mortgages have been generating bigger losses for the owners of the properties, a sign that the debt is getting riskier. That demand underscores how the Federal Reserve risks further inflating some financial markets as it moves closer to cutting rates for the first time in a decade. (Bloomberg Markets | Jul 17)

US banking regulators won’t hold certain foreign investment funds to Volcker Rule restrictions for another two years. Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency clarify their continuing agreement to not take Volcker-related action on funds organized and offered outside the US. Such funds could be subject to the rule depending on ties to foreign banking entities. (Bloomberg Law | Jul 17)

The biggest central banks are preparing to relax monetary policy, but they don't have as much flexibility as they did after the financial crisis. Central banks are starting to make clear politicians also must act if a downturn picks up momentum. (BNN Bloomberg - Canada | Jul 16)

Federal Reserve Bank of New York President John Williams told a conference that the financial industry needs to transition from Libor to the Secured Overnight Financing Rate (SOFR) and not "wait for term rates to get your house in order." Williams said "every new US dollar Libor contract written digs a deeper hole that will be harder to climb out of." (Reuters | Jul 15)
Fed to 'act as appropriate' amid increased uncertainties: Powell
(Jul 16) —  Federal Reserve Chair Jerome Powell said that while US growth is expected to remain solid, with strong labor markets and inflation rising to near 2%, “uncertainties about this outlook have increased, however, particularly regarding trade developments and global growth.”
  • “In addition, issues such as the US federal debt ceiling and Brexit remain unresolved. FOMC participants have also raised concerns about a more prolonged shortfall in inflation below our 2% target. Market-based measures of inflation compensation have shifted down, and some survey-based expectations measures are near the bottom of their historical ranges.”
  • “Many FOMC participants judged at the time of our most recent meeting in June that the combination of these factors strengthens the case for a somewhat more accommodative stance of policy. We are carefully monitoring these developments and assessing their implications for the US economic outlook and inflation, and will act as appropriate to sustain the expansion.”
  • Powell comments were in text of speech in Paris at event on 75th anniversary of Bretton Woods conference; used language similar to last week's congressional testimony.
  • “The manufacturing sector has been weak since the beginning of the year, in part weighed down by the softer business spending, weaker growth in the global economy, and, as our business contacts tell us, concerns about trade tensions,” Powell said after report showing factory output rose in June but fell in the second quarter.
  • Fed estimates core PCE price index rose 1.7% y/y in June, Powell said; report is due July 30.
  • Speaking more broadly, Powell said US economic developments affect the rest of the world and vice versa; “Pursuing our domestic mandates in this new world requires that we understand the anticipated effects of these interconnections and incorporate them into our policy decision-making.”
  • “A legacy of the crisis is that policy makers now have a broader range of tested tools to turn to the next time the effective lower bound is reached. We must continue to assess additional strategies and tools to bolster our economies and meet our inflation and employment mandates.”
  • See also: Powell concession on too-tight Fed underlines shift toward cuts

Source: Bloomberg Government
the cyber cafe
Inside the secretive world of stalking apps
Spyware is hidden on thousands of phones for tracking users without their knowledge.

Windows 10 users warned of 100M malicious adverts threat
Security researchers have uncovered a security threat that's seen users of Windows 10 desktop apps served up with malicious adverts pushing everything from tech support scams to fake antivirus malware.
—  Forbes

A book that takes its title from Pentagon’s term for cyberspace
The Fifth Domain: Defending Our Country, Our Companies, and Ourselves in the Age of Cyber Threats. The authors: Richard A. Clarke, who advised three US administrations on intelligence and counter-terrorism, and now chairs the board of the Middle East Institute; Robert K. Knake is senior fellow for cyber policy at the Council on Foreign Relations.
—  Amazon.com
binge reading disorder
The Seltzer Bubble
Demand for sparkling water is higher than ever. So is supply. This beverage category is attracting millions of dollars in  venture capital investment and changing the drinking habits of a people known for colonizing the world with corn-syrup-laden soda and watered-down beer.

One of the oldest investing theories on Wall Street has yet to confirm this year’s rally is for real
The so-called Dow Theory, developed in the 1900s by Charles Dow and still religiously used by many Wall Street players, argues a true bullish breakout is confirmed when the Dow Jones Industrial Average and the Dow Jones Transportation Average reach new highs simultaneously.
-—  CNBC

How to have a good flight
Tips to help you get through the airport without raising your blood pressure, have a pleasant experience in the air, and arrive refreshed and ready to hit the ground running at your destination.